United Overseas Bank Ltd v Ng Huat Foundations Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Phang Boon Leong JC
• Judgment Date: 10 March 2005
• Neutral Citation: [2005] SGHC 50
• Docket Number: Companies Winding Up No 163 of 2004 (Summons in Chambers No 444 of 2005)
• Date: 10 March 2005
• Year: 2005
• Published date: 16 March 2005
• Plaintiff Counsel: Chan Kia Pheng and Ang Keng Ling (Khattar Wong and Partners)
• Citation: [2005] SGHC 50
• Defendant Counsel: P Padman and Niko Issac (Tito Issac and Co),Ronald Choo and Corrinne Chia (Rajah and Tann),Sunari bin Kateni (Insolvency and Public Trustee's Office)
• Court: High Court (Singapore)
• Subject Matter: Respondent company applying for stay of winding-up proceedings pending outcome of appeal against rejection of application for scheme of arrangement,Whether appeal being used as excuse by respondent to delay its winding up,Winding up,Companies,Factors to be considered,Whether stay of winding-up proceedings should be granted

10 March 2005

Andrew Phang Boon Leong JC:

Introduction

1 The issues in the present case stemmed from two closely-related applications: one party (“the petitioner”) was petitioning for the winding up of the company (“the respondent”), whilst the respondent was applying for a stay of the winding-up proceedings.

2 It was clear that there was a prima facie case for winding up the said company pursuant to s 254(1)(e) read with s 254(2)(a) of the Companies Act (Cap 50, 1994 Rev Ed).

3 What was really at the heart of the present case was whether the present winding up proceedings ought nevertheless to be stayed in the light of the fact that the respondent was appealing against a decision by Lai Kew Chai J (in Originating Summons No 1611 of 2004) on 19 January 2005, rejecting its application for a scheme of arrangement with creditors under s 210 of the Companies Act.

Procedural and substantive justice

4 It is axiomatic that every party ought to have its day in court. This is the very embodiment of procedural justice. The appellation “procedural” is important. Procedural justice is just one aspect of the holistic ideal and concept of justice itself. In the final analysis, the achievement of a substantively just result or decision is the desideratum. It is more than that, however. It is not merely an ideal. It must be a practical outcome – at least as far as the court can aid in its attainment.

5 However, the court must be extremely wary of falling into the flawed approach to the effect that “the ends justify the means”. This ought never to be the case. The obsession with achieving a substantively fair and just outcome does not justify the utilisation of any and every means to achieve that objective. There must be fairness in the procedure or manner in which the final outcome is achieved.

6 Indeed, if the procedure is unjust, that will itself taint the outcome.

7 On the other hand, a just and fair procedure does not, in and of itself, ensure a just outcome. In other words, procedural fairness is a necessary but not sufficient condition for a fair and just result.

8 The quest for justice, therefore, entails a continuous need to balance the procedural with the substantive. More than that, it is a continuous attempt to ensure that both are integrated, as far as that is humanly possible. Both interact with each other. One cannot survive without the other. There must, therefore, be – as far as is possible – a fair and just procedure that leads to a fair and just result. This is not merely abstract theorising. It is the very basis of what the courts do – and ought to do. When in doubt, the courts would do well to keep these bedrock principles in mind. This is especially significant because, in many ways, this is how, I believe, laypersons perceive the administration of justice to be. The legitimacy of the law in their eyes must never be compromised. On the contrary, it should, as far as is possible, be enhanced.

9 It is true, however, that in the sphere of practical reality, there is often a tension between the need for procedural justice on the one hand and substantive justice on the other. The task of the court is to attempt, as I have pointed out in the preceding paragraph, to resolve this tension. There is a further task: it is to actually attempt, simultaneously, to integrate these two conceptions of justice in order that justice in its fullest orb may shine forth.

The issues considered

10 The present case is no exception. There was no doubt in my mind that, in the final analysis, counsel for the petitioner, Mr Chan, was absolutely right in arguing that the respondent had used any and every means to stave off its winding up (the winding-up petition having been filed by the petitioner as far back as 30 July 2004, with the present case constituting the sixth hearing of the winding-up petition). It was clear, as counsel for the respondent, Mr Padman, himself admitted during the course of these proceedings, that the company was woefully insolvent (for example, he stated that while “[i]t has been suggested that a liquidator can chase [the various possible] claims [on behalf of the respondent- company] … there are no funds in the company at present” [emphasis added].

11 One ought also to note, in the context of an application under s 210 of the Companies Act, the following statement of principle by G P Selvam J in the Singapore High Court decision of Re Halley’s Departmental Store Pte Ltd [1996] 2 SLR 70 at 74, [16]–[17]:

In my view, in an application for approval of a scheme of arrangement under s 210 of the Act, the primary question the court must ask is whether the proposed arrangement is a fair one. In effect this means that the scheme of arrangement must be of some real benefit to the creditors and not result in the creditors getting nothing or nearly nothing or the creditors being deprived of a legitimate advantage they would get by winding up the company. The court should not put its imprimatur on what in effect is a scheme of confiscation of the rights of some minority unsecured creditors.

The court, further, must look into the realities of the case and take into consideration all relevant matters. A court exercising a discretionary power may, and indeed must, take into consideration the connection between the company and other companies and information about persons closely connected with the company, as well as the motives of such parties and ignore the fact of separate personality.

12 What reason, therefore, was there for not granting the present petition? In a nutshell, in fact, this was the very thrust of Mr Chan’s arguments when they were reduced to their irreducible core. Indeed, the attainment of a substantively fair and just result was inherent within his arguments.

13 Counsel for the respondent, on the other hand, based his arguments on the need for procedural justice. To quote him, “There is no substantial prejudice to the creditors but substantial prejudice to the respondents.”

14 In this simple sentence lies the very pith and marrow of the respondent’s case in the present proceedings. The use of the word “substantial” is, perhaps, apt to confuse. What Mr Padman really meant was that his client wanted procedural justice.

15 However, it must be borne in mind that the present proceedings were just one instance in a long string of procedural applications taken out by the respondent over a substantial period of time. It is no wonder, therefore, that counsel for the petitioner argued that the issue was not simply a question of prejudice suffered but, to quote him, “more an issue of abuse of the process of court”.

16 I hasten to add at this juncture that counsel for the respondent clarified that his firm had been instructed only more recently. I agreed with him, but, as I stated to him, the issue of dilatoriness did not, in fairness, concern him but, rather, related to his client, the respondent. It was telling, in my view, that counsel for the respondent stated candidly in response, “For that I have no answer.” Whilst I appreciate counsel’s candour, it was amply apparent that, from a substantive perspective, the justice of the case lay with the petitioner and creditors generally instead.

17 Perhaps as telling was Lai Kew Chai J’s rejection of the respondent’s application for a scheme of arrangement with its creditors pursuant to s 210 of the Companies Act. As already mentioned, the appeal against the learned judge’s decision constituted the nub of the respondent’s present application to this court for a stay of the winding-up proceedings (see [3] above). The issue which, therefore, arose from this was a simple, yet crucial, one: Would the appeal against Lai J’s decision be an exercise in legal futility, and was it therefore just another device on the part of the respondent to stave off what appeared to me to be the inevitability of the winding up against the respondent itself?

18 At the heart of the respondent’s argument lay the appeal to procedural justice. In other words, a stay of the present winding-up proceedings ought to be granted because the respondent ought to be given its day in court. More specifically, it ought to be allowed the opportunity to argue before the Court of Appeal that Lai J’s decision ought to be reversed. Although counsel could not cite a local case directly on point (viz, dealing directly with a stay of winding-up proceedings), counsel for the petitioner did cite a number of decisions in analogous situations – in particular, those relating to attempts to stay the execution of a judgment or a mandatory injunction whilst an appeal was pending (see the Singapore Court of Appeal decision of Lee Sian Hee v Oh Kheng Soon [1992] 1 SLR 77 and the Singapore High Court decision of Swiss Singapore Overseas Enterprise Pte Ltd v Navalmar UK Ltd (No 2) [2003] 1 SLR 688, respectively).

19 Other arguments were also canvassed by the respondent – principally, those dealing with the alleged lack of locus standi on the part of the petitioner and the supporting creditor, Samwoh Resources Pte Ltd (“Samwoh”), respectively, to appear in the proceedings mentioned in the preceding paragraph (see also [3] above). Counsel for the petitioner, however, helpfully cited a number of cases that demonstrated that there had in fact been the requisite locus standi (see, for example, Sri Hartamas Development Sdn Bhd v MBf Finance Bhd [1990] 2 MLJ 31 and Re Foursea Construction (M) Sdn Bhd [1998] 4 MLJ 99). Mr Chan’s arguments seemed to me to be very persuasive and it came as no surprise when counsel for the respondent stated that he was not pursuing this point any further. I therefore return to the central point in this case – which is whether a stay of the present winding-up proceedings ought to be granted in favour of the respondent, in order that it might be afforded the opportunity to argue before the Court of Appeal that Lai J’s decision rejecting its application for a scheme of arrangement in...